Why does the Net Present Value change depending on discount rate being used?
Net present value is the sum of present value of cash which is spent or received.
Each such future cash inflow and outflow is discounted at a given interest rate to measure or sum the present time value of money.
The equation for calculating NPV is FV/(1+i)^n
The discount rate for calculating the NPV is a key input and it is the interest rate which is used to discount the future cash flows to yield their present value and a higher discount rate will lower the value of NPV so,as the discount rate changes,the value of NPV changes.
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